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The financial crisis has been a reminder of how vulnerable financial markets are to imprudent behaviour and uninformed choices of financial products by customers. Irresponsible lending practices have been an indisputable factor in triggering the crisis and constitute a continuous risk factor to the property market, private economies and the economy at large.

UNI Europa Finance welcomes the initiative by the Commission to look into the area of responsible lending and strongly urges that regulation is introduced in the area at EU level. The whole area of retail financial products should be regulated in a harmonised and consistent way in order to mitigate the risk of loopholes.

However, UNI Europa Finance regrets that the debate on responsible lending only takes account of the approach of industry and consumers and not that of employees in the sector. Finance employees and their unions must be empowered to contribute to developing solutions to challenges in the credit market.

Employees in financial institutions do not only have knowledge on how current regulation works and first-hand experience of problems relating to responsible lending. They are also the ones to ensure that regulation will have the intended effect. Regulation will not improve the situation if it is not properly implemented and monitored. Finance employees and their unions should be fully involved in the whole process of shaping regulation, implementing and monitoring it. They can provide evidence of mis-incentives and other constraints on employees, which increase the risk of irresponsible lending.

UNI Europa Finance welcomes the introduction of common European advice standards. Such standards should ensure that remuneration and incentive systems as well as working practices are appropriate and conducive to providing proper and objective advice to costumers. This will mean a fundamental change in the current sales practices.

Incentives linked to the sale of an individual product create conflicts of interest in the sales situation and should be avoided. The use of excessive and unrealistic sales targets on specific products is a key obstacle to qualified and objective advice and to obtaining the best coherence between the products sold and the need and risk profile of the individual customer. Furthermore, excessive sales targets also cause high levels of stress on employees to the detriment of employees’ working conditions but also the quality of advice.

To ensure proper enforcement of such advice standards, implementation at national level should be made binding with the possibilities of imposing sanctions on financial companies. Policies and practices for giving advice should thus be subject to supervision by the supervisory authorities. The enforcement would also be improved considerably if finance employees receive proper training in how to fulfill advice standards.

UNI Europa Finance suggests that each financial company develops a charter on responsible sale of financial products agreed between management and unions and other stakeholders. Such charters should make explicit, public and verifiable the principles being followed in advice, sales and marketing as well as in operating procedures and work practices.

1. Incentive structures for employees in sales and advice functions should encourage good customer services and qualified advice and not only sale of products. Remuneration structures should not be linked to individual sales targets.

2. Prudent supervision should oversee that incentive structures for employees sales and advice functions are appropriate, customer-oriented and risk conscious. Authorities should be able to penalise inappropriate practice.

3. There should be structured dialogue between unions in the finance sector and supervision authorities at all levels to address this issue and other internal practices affecting companies’ risk management and the stability of the financial system.

4. Charters on responsible sale of financial products should be developed by each financial institution and be agreed between management, unions and other stakeholders

5. Measures should be taken to ensure sufficient and continuous training of employees to keep up with the rapid innovation and increasing complexity of the financial products they sell. Employees must have a full understanding of the products they sell, in particular in terms of the implications for customers.

Consumers have the right to good advice; finance workers have the right to give good advice.